India’s Petrol Hike: Gas Goes Up, and a City Melts Down

Traffic in New Delhi is bad at the best of times. During a run on fuel, it devolves into an unholy mess. On Wednesday evening, the wide arteries of India’s capital became a gnarled tangle of SUVs, Ambassadors, motorcycles and shuddering auto-rickshaws, as people from all corners of the city were stuck together in a 38°C gridlock, honking their horns in desperate futility.

The problem? The steepest fuel hike in a decade would take effect at midnight on Thursday, sending thousands of cars scrambling to gas stations to fill their tanks for one last cheap guzzle. Police were called in as station owners claimed that their tanks were empty — until 1 a.m. or so. The state-run oil companies’ price increase of $0.14 to $1.31 per liter of gas in Delhi (it varied slightly from state to state) came one day after the governing United Progressive Alliance (UPA) coalition celebrated its anniversary, generating snarky comments about the UPA’s “gifts to the common man” as it marked its third year in office this term and eighth year in power.

The rise in gas prices — kerosene, diesel and cooking gas are unaffected, for now — also came the day after Parliament adjourned, leading many, including UPA allies, to accuse the government of sneaking an unpopular decision through without consulting anyone. The government responded by saying that gasoline, which was officially decontrolled in June 2010, is a deregulated commodity and this was a market-driven move. Opposition members, however, demanded the hike’s immediate reversal, with Bharatiya Janata Party spokesman Prakash Javadekar warning of “a strong democratic agitation.”

A partial rollback of the price hike would only further chip away at faith in a government that critics already accuse of being in a state of paralysis and that has withdrawn policies after announcing them before. On the other hand, as is, the measure is bound to be wildly unpopular with middle-class voters, who are disgruntled over rising inflation and corruption. In a poll released earlier this week, 66% of respondents across eight cities said they were dissatisfied with the work of the ruling coalition.

State oil companies have been clamoring for the green light to raise gas prices for months now, as they’ve been incurring losses due to rising global oil prices and the depreciating rupee, which fell for the sixth straight day to an all-time low against the dollar on Wednesday. By going ahead with the hike now, the government may be banking that any popular upset will die down before the next state polls, which are still several months away. Or its leaders may be hoping that the broader impact of the hike will ultimately do more good than harm, by offsetting concerns over India’s yawing fiscal deficit and increasing confidence in the economy to arrest the currency’s slide.

While the political and economic implications play out, a few things are certain: consumers across India are going to have to reach a little deeper into their pockets to fill up their tanks now. And if the price of gas goes up again this summer, it is highly advisable to stay home. If you must hit the road, make sure your vehicle has air-conditioning — and a loud horn.